DAIICHI SANKYO COMPANY LTD. versus JAYARAM CHIGURUPATI & ORS.

Citation: [2010] 8 S.C.R. 251 · Decided: 08-07-2010 · Supreme Court of India · Bench: S.H. KAPADIA · Disposal: Appeal(s) allowed

Cited by 2 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

[2010] 8 S.C.R. 251 
DAIICHI SANKYO COMPANY LTD. 
v. 
JAYARAM CHIGURUPATI & ORS. 
(Civil Appeal No. 7148 of 2009) 
JULY 08, 2010 
[S.H. KAPADIA, CJI, AFTAB ALAM AND 
SWATANTER 
KUMAR, JJ.] 
Securities and Exchange Board of India (Substantial 
A 
B 
Acquisition of Shares and Takeovers) Regulations, 1997: 
C 
Regulations 20(4)(b), 20(12), 2(e)(1) and (2) - Offer price 
for acquisition of shares in case of indirect takeover of a 
company - Determination of - Ranbaxy acquired shares of 
Zenotech in January 2008 at a price of Rs. 160 per equity 
D 
share -
On June 16, 2008, Daiichi made public 
announcement to the shareholders of Ranbaxy to acquire 
shares - Daiichi acquired more than 50% of share capital of 
Ranbaxy on October 20, 2008 and Ranbaxy became 
subsidiary of Daiichi - On January 19, 2009, Daiichi mad~ 
public announcement to acquire shares of Zenotech @ 
E 
Rs. 113. 62 per equity share - Whether Ranbaxy was a 'person 
acting in concert' with Daiichi and therefore whether the price 
paid by Ranbaxy to the shareholders of Zenotech in January 
2008 was relevant for determining exit price offered by Daiichi 
to Zenotech's shareholder under Regulation 20(4)(b) - Held: 
F 
Ranbaxy did not qualify as 'persons acting in concert' under 
·Regulation 2(e)(1) for the acquisition of shares of Zenotech 
as Ranbaxy and Daiichi did not have any common object or 
purpose to acquire the shares or voting rights of the Zenotech 
when the agreement was executed between Ranbaxy and G 
Daiichi on June 11, 2008 - Acquisition of Zenotech's shares 
by Daiichi was only consequential to the acquisition of 
Ranbaxy and was not a concerted action - Any acquisition 
of Zenotech shares made by Ranbaxy earlier at a time when 
251 
H 
252 
SUPREME COURT REPORTS 
[2010) 8 S.C.R. 
A it was not a 'person acting in concert' with Daiichi was of no 
consequence and price paid by Ranbaxy for Zenotech shares 
at that time would not attract clause (b) of Regulation 20(4) -
Securities and Exchange Board of India Act, 1992. 
8 
Regulation 2(e)(1} - Concept "person acting in concert" 
- Held: The concept is based on a target company on the one 
side, and on the other side two or more persons coming 
together with the shared common objective or purpose of 
substantial acquisition of shares etc. of the target company -
Unless there is a target company, substantial acquisition of 
C whose shares etc. is the common objective or purpose of two 
or more persons coming together, there can be no "persons 
acting in concert". 
Legislation: Delegated legislation - Legislative practice 
0 in India that unlike an Act, a Regulation or the later 
amendments introduced in it are not preceded by the "Object 
and Purpose" clause - Absence of "Object and Purpose" 
clause in the Regulations creates difficulties for Courts in 
properly construing the provisions of Regulations dealing with 
E the complex issues - Need for change in old practice and to 
add at the beginning the object and purpose clause to the 
delegated legislations as in the case of the primary 
legislations. 
On October 3, 2007 Ranbaxy entered into a Share 
F Purchase and Share Subscription Agreement (SPSSA) 
jointly with Zenotech and its promoter whereby Ranbaxy 
agreed to purchase a large block of equity shares 
representing 27.35% of the company's fully paid up 
equity share capital, at a negotiated price of Rs.160 per 
G equity share and to subscribe to 54.89 lacs fully paid up 
equity shares at the same price under a preferential 
allotment of Zenotech. On October 5, 2007, Ranbaxy 
made public announcement whereby it sought to acquire 
from the public shareholders, equity shares of Zenotech 
H constituting 20% of its expanded share capital. In the 
DAIICHI SANKYO COMPANY LTD. v. JAYARAM 
253 
CHIGURUPATI & ORS. 
public announcement, Ranbaxy quoted offer price of A 
Rs.160 per equity share. On November 23, 2007, 
Zenotech duly allotted 54.89 lacs fully paid up shares to 
Ranbaxy. The open offer made by Ranbaxy for Zenotech 
shares in terms of Securities and Exchange Board of 
India (Substantial Acquisition of Shares and Takeover) 
B 
Regulations, 1997 (the Takeover Code or Takeover 
Regulations) closed on November 15 2008. Following the . 
completion of the open offer formalities, Ranbaxy issued 
a post offer announcement on January 30, 2008. The 
announcement disclosed that though in the public c 
announcement it offered to purchase shares amounting 
to 20% of Zenotech's capital, it actually received o

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